a conceptual model of e-commerce taxation using a circular

A Conceptual Model of E-CommerceTaxation Using a Circular Model for

E-Commerce Sustainability

Somkeit Noamna and Supaporn Kiattisin∗

Technology of Information System Management Division, Faculty of Engineering,Mahidol University, ThailandE-mail: [email protected]; [email protected]∗Corresponding Author

Received 16 April 2020; Accepted 06 May 2020;Publication 17 August 2020

Abstract

E-Commerce tax is among the most crucial factors affecting E-Commercegrowth and information and communication technology, including playinga vital role in facilitating the global commerce market. This study aimed toinvestigate the relationship between ICT development by using the ICT devel-opment index (IDI) and E-Commerce diffusion is an effect on E-Commercetaxation principles. The paper was proposed as a new approach and ini-tiatives for implementing E-Commerce development through the circularmodel for E-Commerce sustainability (CMES). The online questionnairesfor the survey were used to gather data via social media, i.e. Facebook,Line and Instagram. The data were gathered from a sample of 308 peo-ple who sell products and services through online commerce in Thailand.Exploratory factor analysis (EFA) and confirmatory factor analysis (CFA)were used to validate and measure the construction of the questionnaires.The relationship among the ICT development index, E-Commerce diffusionand the E-Commerce taxation principles was proved to apply successfully tothe structural equation modelling (SEM) technique. The results showed thatthe ICT development index (IDI) has a positive influence on E-Commercediffusion and E-Commerce taxation principles. Further, the results indicated

Journal of Mobile Multimedia, Vol. 16_1-2, 103–130.doi: 10.13052/jmm1550-4646.16126© 2020 River Publishers

104 S. Noamna and S. Kiattisin

that E-Commerce diffusion has a positive effect on E-Commerce taxationprinciples, and hence are significant.

Keywords: E-Commerce taxation principles, E-Commerce diffusion, ICTdevelopment index (IDI), structural equation modelling (SEM), circularmodel for E-Commerce sustainability (CMES).

1 Introduction

GDP (Gross domestic product) is a significant national economic growthindicator. The OECD Annual Revenue Statistics 2018 shows that the ratioof national income from taxation per GDP has been increasing in manycountries during 2008 and 2009 [1]. In present-day, digital economy is themajor policy that has been employed by governments to actuate the domesticeconomy in many countries all over the world. For instance, the policy isused to improve information technology to be compatible with economicand cultural activities and procedures, especially, E-Commerce stimulation.It can be considered that the digital economy has been a significant sourceof national income and an essential economic growth indicator since thenumber of business entrepreneurs who use the online trading platform hasbeen rising continually. Currently, compared to the earlier E-Commerce erathe trading aspect and consumer behaviour have been changing considerablydue to the expansion of the internet network and information technology [2]including mobile devices which are used nowadays having capabilities to beemployed conveniently [3, 4]. Not only mobile device users are able to buyand sell products through online platforms easily, but the factors as previouslymentioned also influence a large number of businesses that have changed thesales channel from physical stores to be more and more on online shops thatemerge as E-Commerce [5].

Moreover, nowadays the E-Commerce system has created efficient sup-porters such as social media which has connected entrepreneurs with globalconsumers faster and more conveniently [6]. The statistics of online tradingshows that consumer’s behaviour worldwide has a tendency to trade viasocial media such as Facebook and Instagram, which are extensively usedworldwide [7, 8, 9]. Due to the switch in business and customer behaviour, theaforementioned causes significant changes in the economic system of manynations because the government’s source of income from taxation has beenchanged [10]. However, E-Commerce taxation in many countries is still notefficient, and as a result not only the taxation does not reach the target but

A Conceptual Model of E-Commerce Taxation Using a Circular Model 105

also not conform to the nation’s economic system that causes the economicdecline [11]. In the case of Thailand, from the data of the Fiscal Policy Officeyear, 2017 reported that 59.4 per cent of the government income was from therevenue department in which the most income was from value-added tax as29.3 per cent and from corporate income tax as 13.8 per cent, personal incometax as 13.4 per cent and specific tax as 2.2 per cent [12]. Therefore the sourceof taxation has been different because of the influence of information tech-nology, and this phenomenon will affect taxation in terms of the countries’development, especially, with regards to network infrastructures. Essentialdigital resources are fundamental for improving the E-Commerce systemwhich is the vital national income source because, in the present-day scenario,trading online needs tools and an intermediate to connect between sellers andbuyers. It is considered that the tools and intermediaries are digital resourcesand digital infrastructure. There are two digital resources in the online tradingprocess: the first is tangible which include the network infrastructure andcomputer server, and mobile devices and the second is intangible, such asplatforms, websites and online trading legalization [13].

One of the essential digital resources is high-speed internet which is ableto connect consumers worldwide. Therefore, digital resources and digitalinfrastructure are influential for the national development of the digitalsociety and trading online. The other essential factors are the conditions thatstimulate online trading and government policy involved in improving digitalresources [14]. Not only information technology and communication but alsoefficient utilization of public internet are important factors in enhancing digitalresources. These conditions influence the development of the E-Commercesystem, which nowadays is the essential national income [15, 16].

The improvement of information technology, network system and infras-tructures in which affiliate E-Commerce is the vital system and variant inimproving and promoting E-Commerce dictates the part of national devel-opment. Advocating and developing information technology and digitalinfrastructures are necessary for the country’s development. However, criticalmethods are economic development and population acknowledgement [17].These methods are significantly relevant in improving the information tech-nology system and digital communication, and thus they relate dramaticallywith development and advocating the national E-Commerce system. How-ever, the government needs to plan and administer dynamically to provideadequate digital resources and accomplish reliability for domestic and inter-national entrepreneurs who are able to expand the business and connect andcooperate with others through digital resources conveniently and sustainably.


According to the identified problem, therefore, we have reached and pro-posed a new idea and a new model for the E-Commerce taxation legalizationand policy for the present-day digital society. Structure equation modelling(SEM) was used to evaluate factors that are relevant in the E-Commercetaxation. The expected result is to help institutions and stakeholders in theE-Commerce taxation legalization and policy to have guidance and methodsto legalize appreciably and accurately the E-Commerce taxation based on theE-Commerce taxation principles [18, 19].

The rest of the paper consists of five topics: related work, methodology,results, discussion and finding and conclusion. Firstly, the factors that relatedwith E-Commerce taxation are studied. Secondly, the experiments by descrip-tive and multivariate statistics were used to estimate the model. Thirdly, it isexplained that the E-Commerce growth was affected with ICT developmentwithin results interpreted. The strong relationship between ICT develop-ment and E-Commerce diffusion was reflected in the outputs. Fourthly, theguideline for E-Commerce taxation through a conceptual circular modelfor E-Commerce sustainability (CMES) is proposed. Lastly, the conclusiondescribed about how to use a new perspective for guiding the policy forE-Commerce taxation.

2 Related Work

The concept of this study has been constructed from various literaturesand E-Commerce taxation theories, including factors that are relevant toE-Commerce tax. A review of the existing literature includes theories andempirical studies. The analysis has been divided into three parts as detailedhereunder.

2.1 E-Commerce Taxation Laws

In the United States of America, all states have been the income source fromonline trading. This is in consequence of the launching of the law called ‘TheInternet Tax Freedom Act 1998’ for supporting and providing online tradingbusinesses. Later on, there was a legislation to improve the previous lawcalled ‘The Permanent Internet Tax Freedom Act 2016’ to postpone taxationin the E-Commerce system and to access the internet. The law enforcementhas been postponed to June 30th, 2020 and the circumstance benefits domes-tic customers because the law will burden the customers in paying tax in manyways such as bit tax, bandwidth tax, e-mail tax, etc. [20]. Moreover, under


the law called ‘Diverted Profit Tax Act 2017 (DPT)’ which the Australiangovernment enacted to increase the capability of Commission of Taxation,the commission has power in taxation for multinational corporations (MNCs)that avoid paying tax in Australia. The law enforcement is in operation sinceJuly 1st, 2017 and the tax rate is 40 per cent. The MNCs that have incomeworldwide up to 1 billion AUD and income in Australia up to 25 millionAUD must pay the tax [21].

There is a new approach to taxation in India called “‘Equaliza-tion Levy’. It is the equalization between the domestic and internationalentrepreneurs [20]. The tax is for customers at 6 per cent of advertisingexpenses on the online system or in the other services from the MNCs thathave permanent establishment (PE) in the countries of income source andalso if the value of the business is more than 100,000 INR. The law statesthat these MNCs must register in India [1]. It is considered that governmentsin many countries have been interested in the taxation of E-Commerce systemmore and more because the aspect of trading has been changing and tendingto grow dramatically. David and William [10] studied taxation and proposedthe idea that taxation is different in each country, for example, in the UnitedStates, every state has an independent taxation policy because of the FederalRepublic system. Moreover, Steven [22] enumerates the reasons for the dis-tinctive nature of the E-Commerce system taxation policy because the policyof countries has different obstacles in taxation. The diversity of economicconditions between developed and developing countries is one of the reasons.Richard and Subhajit [11] proposed the idea that the policy which the OECDhas been trying to force to authorize the standard of the E-Commerce systemtaxation is unable to cover every country, especially, developing countries.Due to poverty, therefore, those countries have no financial stability tofollow the regulation as in developed countries. Burca [23] has studied andconcluded that E-Commerce regional taxation or E-Commerce product andincome raking taxation which has been used in many countries cannot bepractically feasible because of overlapping in taxation policy. The taxationoverlapping causes a higher taxation burden on the entrepreneurs. Someresearchers introduced an E-Commerce taxation model that is same as the USmodel, for example, there should be a third party to moderate E-Commercebusiness between sellers and customers.

However, the model must have the same standard of instruction and leg-islation for regular and E-Commerce products to establish fairness in onlinetrading for both domestic and international customers and entrepreneurs [24].


2.2 Adam Smith’s Taxation and OECD E-Commerce TaxationPrinciples

Adam Smith, the father of economics, wrote a significant book called ‘TheWealth of Nations’ published in 1776 [25]. The book delivers four essentialfundamentals for taxation which are (1) equality, (2) certainty, (3) the conve-nience of payment and (4) the economy in collection. These fundamentalshave been sufficient and acceptable until today. In 1992, the OECD hassuggested an E-Commerce taxation model called the ‘Taxation FrameworkConditions for electronic commerce’ [18] which has five principles. However,Rifat [19] had studied and suggested that the framework should be consideredas a guideline for the E-Commerce taxation. The framework is as follows:

(1) Neutrality: Taxation should apply to be neutral and equitable betweenforms of online commerce and conventional forms of business.

(2) Efficiency: Compliance rates for administrative expenses and taxpayersfor the tax authorities should be reduced as far as feasible.

(3) Certainty and simplicity: Clearance and straightforwardness in tax rulesto understand are necessary to taxpayers. Thus, taxpayers can estimatethe tax results in advance of a transaction, including knowing when,where and how the tax is to be accounted for.

(4) Effectiveness and fairness: Tax evasion must be minimized whilekeeping counter-acting measures proportionate to the risks involved.Taxation should collect in the right time and the right among.

(5) Flexibility: Flexible and dynamic in taxation policy to ensure that theapproach keeps along with commercial developments and technologicalaspects.

Government taxation for a citizen is most important for the nationalincome and the citizen has to pay tax for national development, for example,tax could be spent in social welfare measures and hence promote valuablepolicies sufficiently and efficiently. The government must have applicabletaxation policy which suits national conditions such as a taxpayer’s income.One of the most important issues in taxation is the balance of spending the taxon infrastructure investment and improving the public utility system which isnecessary for economic growth. For stability in national taxation, not only thetaxation must follow the fundamental of efficient taxation but also agreeableand suitable with the national economic conditions [26].


2.3 Digital Resources and E-Commerce

Online trading nowadays needs tools and an intermediary to connect andcommunicate between sellers and buyers [15]. The devices are considered asdigital resources or digital infrastructures. There are two categories of digitalresources in online trading: firstly, tangible, such as infrastructures, internetnetworks, personal computers, mobile devices, etc. and secondly, intangi-ble, such as platforms or websites and legislations in online trading [27].A digital resource is fundamental for communication and connection, forexample, high-speed internet is one of the essential resources to connectonline buyers and sellers worldwide [28]. Currently, 5G technology is thenew communication technology that is integrated into many countries acrossthe world to show the connection and communication technology readiness.In conclusion, digital resources and digital infrastructures are noticeablyessential for promoting and developing the country in term of digital societyand online trading. Jennifer et al. [14] studied and suggested that conditionsand policies which are involved in developing digital resources are remark-able in the E-Commerce system development process in both C2C and B2Ctypes. The researchers collected data from 10 countries (Singapore, Taiwan,Brazil, China, Denmark, Japan, France, Germany, United States and Mexico)demonstrated that there are three main factors involved in broadening theE-Commerce system as discussed hereunder:

(1) Global environment: MNC strategies, global production networks,global competition and trade liberalization.

(2) National environment: information infrastructure, industry infrastruc-ture and competition, economic and financial resources, organizationalenvironments, consumer preferences and demographics.

(3) National policy: E-Commerce promotion, telecom liberalization and E-Commerce legislation.

Kevin [15] and Mahdi [16] studied and suggested that adequate infor-mation and communication system, including an efficient internet network,will support economic development. Moreover, when countries are accessi-ble with these factors, it will benefit the E-Commerce development whichis the modern trading aspect and an important national income source.Therefore, the development of information and communication systems andE-Commerce public utility are the significant mechanist and variable indeveloping and promoting the E-Commerce system. Anteneh [17] suggeststhat not only supporting and emerging information technology and digital


infrastructure is very important for a country’s development but also econom-ical and education improvement. Anteneh has shown the main factors whichconform to the ICT development index of ITU [29], and this identificationis an international assessment of information technology and communicationsystem development that includes (1) ICT access, (2) ICT use, and (3) ICTskill [30, 31, 32, 33, 34].

Thus, information technology development always relates to a nation’sdevelopment and also promoting the E-Commerce system. However, thegovernment needs to plan and manage information technology and digi-tal resources adequately and render them trustworthy to help people andentrepreneurs of both domestic and international origin so as to equip themdevelop their business to connect and cooperate by using digital resourcesconveniently and sustainably.

From the study and reviews of literature related to E-Commerce taxation,it can be seen that there are many factors related to E-Commerce taxation. TheE-Commerce taxation should follow the OECD taxation guidelines and has tobe consistent with Adam Smith’s taxation principles. However, the factor thatenhances E-Commerce business growth is digital resources such as informa-tion and communication technologies and infrastructures for E-Commerce.Importantly, E-Commerce tax policies must support and be of conve-nience for online businesses thereby ensuring flexibility for E-Commercediffusion.

3 Methodology

The descriptive and multivariate statistics were used to test the model in thisstudy. In a finding with regard to the relationship through review of literature,three factors (E-Commerce taxation principles, ICT development index andE-Commerce diffusion) were studied. Figure 1 depicts the research processesand the details described as follows.

3.1 Conceptual Model and Hypotheses

The conceptual model of this research is based on the relate studies, theconceptual model and hypotheses being developed as shown in Figure 2,Figure 3 by three components, respectively.

1. ICT development index (IDI)The approach to the ICT development index consists of three factors:ICT access, ICT use and ICT skill [30, 31, 32, 33, 34].


Figure 1 Research processes.

Figure 2 Conceptual model.


Figure 3 Hypotheses model.

H1: ICT development index is positively associated with E-Commercediffusion.

2. E-Commerce diffusionThe global environment and national policy that concern E-Commercediffusion consists of three factors: global environment, national environ-ment and national policy [14].H2: E-Commerce diffusion is positively associated with E-Commercetaxation principles.

3. E-Commerce taxation principles.The principles of E-Commerce taxation consist of five factors: neutral-ity, efficiency, certainty and simplicity, effectiveness and fairness andflexibility [18, 19].H3: ICT development index is positively associated with E-Commercetaxation principles.

3.2 Development of Initial Instrument

3.2.1 Development Questionnaires for SurveyQuestionnaires were used to collect 46 items that relate to E-Commercetaxation for the research. This way, the survey has six parts as detailedhereunder.Part 1: 4 questionnaires about the general information of the respondents.Part 2: 3 questionnaires about buying–selling behaviour in products andservices on the internet.


Part 3: 10 questionnaires about the principles of E-Commerce taxation prin-ciples.Part 4: 11 questionnaire about the development of information and com-munication technology (based on ICT development index, IDI) relevant toE-Commerce.Part 5: 18 questionnaire about factors that are relevant to E-Commercediffusion.Part 6: The additional comments from the research participants.

3.2.2 Content validity of the instrumentThe questionnaire was approved by the thesis advisor and three experts whohave tax expertise, economic and information technology in electronic com-merce to check content’s validity and language. The criteria for evaluating allquestionnaires with the contents or purposes for measurement is appropriatefor the research by considering the IOC value more than 0.5 [15] in eachquestion and improve the questions according to the recommendations. TheIRB (the Institutional Review Board of Mahidol University) has approved thequestionnaire via No. CIRB 2019/248.2409.

3.2.3 Refinement of the items and development of finalinstruments

The questionnaire that passed the content validation was sent in google formto the 30 respondents for trying out samplings with the online sellers [15,35, 47]. The reliability test resulted from the 46 items on the factors inE-Commerce taxation calculated with the program SPSS V.24 through theCronbach’s Alpha-based reliability test contributed to the acceptable value ofmore than 0.70 [41] at 0.877.

3.3 Data Collection

In determining the sample size, the researcher defined two criteria with Hair[41] and Cochran’s formula [46]. Based on these two criteria, the researcherwas assigned 400 samples and given 5% to drop out. To obtain the resultof sampling in this experiment, at least 380 sample sizes were taken intoconfidence in the analysis of this study [41]. The questionnaires were sent asprivate messages in google form via social media such as Facebook, Line andInstagram to a sample group.


3.4 Descriptive Statics and Measurement Model

This research is a quantitative and survey study. The primary assessmentswere made using AMOS version 22 and SPSS version 24 for descriptive testand construct validity analysis. The exploratory factor analysis (EFA) andconfirmatory factor analysis (CFA) were used to define item validities as wellas identify and confirm influential factors. The construct validity measuredthe convergent validity and discriminant validity for all the constructs inthe model [41, 42, 43, 44]. We confirmed the consistency of the modelwith empirical data by considering the Chi-Square value (χ2), Goodnessof Fit Index (GFI), Tucker Lewis Index (TLI), Normal Fit Index (NFI),Comparative Fit Index (CFI) and P-Value [45].

3.5 Structure Equation Modelling

The structural equation modelling explains the relationship between a con-struct (latent) and a variable. The processes consist of five steps to developthe structural model to explain the relationship among variables: model spec-ification, model identification, model estimate, model evaluation and modelmodification [44, 45]. The program SPSS AMOS version 22 was used toexplore the relationship among the whole constructs by the path diagram.

3.6 Proposed Model and Discussion

The model is presented with all relevant factors in E-Commerce taxation withdigital resources consumption. The discussion will interpret our results basedon theories and give recommendations that concern E-Commerce taxation.

4 Results

This section elaborates our results with reference to sample and proce-dure, measures, exploratory factor (EFA) analysis, confirm factor analysis(CFA), descriptive statistics, path analysis in structure equation modellingand concept of a circular model for E-Commerce sustainability (CMES).

4.1 Sample and Procedure

The questionnaires were sent as private messages on social media such asFacebook, Line and Instagram to a sample group one by one to make surethey are the right target for this study. The 308 respondents included 72% of


females and 28% males. The demographic profiles represented the followingdata. More than 67% of them graduated with a bachelor’s degree, 29% hadhigher than a bachelor’s degree and 0.04% were under bachelor’s degree.With reference to frequency for doing business via online, the statisticsshowed quite similar for 1–2 weeks and 3–4 weeks, at 39% and 30%,respectively. The same has been 11% for 5–6 weeks and for than more than 6weeks it is 20%. The proportion for usage time on online shopping mostly is1–2 times (58%), also 3–4 times (20%), less than 30 minutes is 15% and 7%for more than 7 times.

4.2 Descriptive Statistic Measures

The descriptive statistics were mainly used in measuring items in order toclarify the overall values of estimations from the respondents. For the valueof means between 3.48 and 4.26, the Standard Deviations (S.D.) were 0.68to 0.96. Table 1 depicts the statistics that the total question items passed thevalue loading criteria being rejected by the assessment. E-Commerce taxationprinciples [15, 19] consists of five dimensions which comprise of efficiency,neutrality, effectiveness and fairness, certainty and simplicity and flexibility.The Cronbach’s alpha for each of the five dimensions ranged from 0.71 to0.94. ICT development was measured using the ICT development index thatconsists of three dimensions which are ICT access, ICT use and ICT skill [15,19, 30, 31, 32, 33]. The Cronbach’s alpha for each ICT development indexranged from 0.82 to 0.85 for total dimensions. The E-Commerce diffusionwas examined by the key global, environment and policy factors that act asdeterminants for E-Commerce diffusion by centre for research on informationtechnology and organizations (CRITO) framework [14]. The dimension con-sists of three measurements which comprise of global environment, nationalenvironment and national policy. Further, the Cronbach’s alpha for thesedimensions ranged between 0.87 and 0.92.

4.3 Exploratory Factor Analysis and Confirm Factor Analysis

EFA was evaluated using SPSS version 24. In the EFA method, the Kaiser-Meyer-Olkin (KMO) and Barlett test determined whether data is appropriatefor the EFA. KMO coefficient was found to be 0.866, and Barlett test wassignificant (χ2 = 9946.890; p = 0.001). These outputs presented that thesample is large and sufficient to conduct the EFA [8, 35, 36]. The results offactor analysis with mean, SD, reliability values and communities are given in


Table 1 Descriptive statistics and EFA results of E-commerce taxation principles, ICTdevelopment index, and E-commerce diffusion

Reliability CommunitiesFactor name and statements Mean SD (> 0.7) (> 0.5)E-Commerce taxation principlesNT1 3.48 0.911 0.701 0.720NT2 3.59 0.863 0.701 0.645EC1 3.89 0.898 0.716 0.760EC2 3.83 0.938 0.716 0.721CS1 4.24 0.844 0.948 0.883CS2 4.22 0.879 0.948 0.874EF1 3.95 0.793 0.740 0.754EF2 3.58 0.963 0.740 0.743FT1 3.80 0.955 0.932 0.820FT2 3.77 0.954 0.932 0.874ICT development indexIA1 3.85 0.891 0.822 0.835IA2 4.19 0.681 0.822 0.769IA3 4.18 0.774 0.822 0.752IA4 3.78 0.861 0.822 0.671IA5 4.15 0.845 0.822 0.692IU1 4.26 0.694 0.826 0.757IU2 4.03 0.790 0.826 0.787IU3 4.14 0.726 0.826 0.708IS1 3.88 0.770 0.855 0.655IS2 3.77 0.797 0.855 0.809IS3 3.87 0.821 0.855 0.757E-Commerce diffusion GE1 4.06 0.815 0.879 0.588GE2 3.92 0.717 0.879 0.709GE3 4.02 0.742 0.879 0.679GE4 3.95 0.790 0.879 0.775GE5 4.07 0.720 0.879 0.747GE6 4.06 0.710 0.879 0.768NE1 3.85 0.836 0.911 0.774NE2 3.82 0.811 0.911 0.750NE3 3.88 0.828 0.911 0.729NE4 3.82 0.827 0.911 0.716NE5 3.95 0.812 0.911 0.711NE6 3.59 0.836 0.911 0.788NE7 3.93 0.734 0.911 0.597NE8 3.78 0.814 0.911 0.677NE9 4.10 0.776 0.911 0.597NP1 3.98 0.805 0.922 0.701NP2 3.98 0.829 0.922 0.813NP3 4.05 0.849 0.922 0.807Notes: KMO = 0.866 ( Ref. > 0.7); Chi-square = 9946.890; p = 0.000


Table 2 CFA results for E-commerce taxation principles, ICT development index andE-commerce diffusionVariable χ2/df CFI NFI GFI RMSEA P(N=308) df χ2 (< 2) (> 0.95) (> 0.95) (> 0.95) (< 0.05) (> 0.05)E-Commerce taxationprinciples

23 32.98 1.43 0.99 0.98 0.97 0.038 0.081

ICT development index 24 31.36 1.30 0.99 0.98 0.98 0.030 0.143E-Commerce diffusion 71 87.77 1.23 0.99 0.97 0.96 0.028 0.086

Table 1. The CFA model was used to prove the factors within the constructs ofa set in the observed variable. The CFA outputs depicted in Table 2 depicts thefit indices for E-Commerce taxation principles, ICT development index andE-Commerce diffusion, and were fit within the modified values as Brownesuggested [40, 41].

4.4 The Measurement Model

The data collected from 39 questionnaires regarding factors affecting E-Commerce taxation are presented in Tables 3 and 4. In Table 3, estimation ofthe internal consistency computed from the composite reliability (CR) withsufficient values more than 0.70 was in the range 0.80–0.98 [41]. In addition,the evaluation of the convergent validity calculated from the average varianceextracted (AVE) was acceptable if the values were more than 0.50 [41] at0.50–0.95. Furthermore, CR is higher than AVE for all constructs. Therefore,our results show that the factors in the measurement model have adequateconvergent validity [42]. Estimating the discriminant validity was to exposethe constructs in the model that could hence indicate the specific compositevalidity by the AVE value. The square root of the average variance extracted(AVE) was more than the correlations as shown in Table 4. This verifies thenon-existence of multi-collinearity and discriminant validity for testing of thewhole constructs.[43].

Table 3 Construct reliability and validityComposite Average Variance

Item Cronbach’s Alpha Reliability ExtractedConstructs Code (> 0.70) (> 0.70) (> 0.50)E-Commerce TaxationPrinciples

ETP 0.86 0.80 0.50

ICT Development Index IDI 0.90 0.80 0.58E-Commerce Diffusion ED 0.94 0.98 0.95


Table 4 Correlations, square root of average variance extracted (AVE), means and standarddeviationsConstructs ETP IDI EDE-Commerce Taxation Principles (0.70)ICT Development Index 0.50∗∗ (0.76)E-Commerce Diffusion 0.54∗∗ 0.66∗∗ (0.97)

Mean 3.83 4.01 3.93SD 0.60 0.55 0.56

Notes: ∗∗Correlation is significant at the 0.01 level (two-tailed). The square root of averagevariances (AVE) are showed in diagonal brackets.

4.5 Structure Equation Modelling

All hypotheses were proved of the relationship by structure equation mod-elling. As stated, H1: claims that ICT development index is positively relatedto E-commerce diffusion, H3: ICT development index is positively relatedto the E-Commerce taxation principles and H2: E-Commerce diffusion ispositively associated with the E-Commerce taxation principles. Figure 4illustrates the measurement of the SEM for the research model.

The model was tested using the good of fitness fit analysis. Severalindices for the evaluated final model depict the following results: χ2 = 46.99,df = 33, χ2/df = 1.42, comparative fit index (CFI) = 0.991, normed fitindex (NFI) = 0.972, goodness-of-fit index (GFI) = 0.973 and root meansquare error of approximation (RMSEA) = 0.037. Following the results, thereport confirmed that the research model is acceptable and appropriate tothe data by using the test of goodness of fit of the model [45]. Consideringthe estimation of factor loading in the SEM model, the highest value ofthe observed variable in E-Commerce taxation principles was effectivenessand fairness (β = 0.77). The highest score of the observed variable in E-Commerce diffusion was the global environment (β = 1.13). In the observedvariable of the ICT development index (IDI), the highest value was ICT use(β = 0.85). Table 5 represents the regression weights for the relation betweenthe variables. Total constructs are positive and significant (p < 0.001). Thefirst assessment between the ICT development index and E-Commerce dif-fusion showed a positive relationship (β = 0.63, p = 0.000). The secondassessment, which is between the E-Commerce diffusion is positively relatedto the E-Commerce taxation principles (β = 0.28, p = 0.000). In part,the ICT development index (IDI) is positively related to the E-Commercetaxation principles (β = 0.48, p = 0.000). The squared multiple correlations(R2) for the E-Commerce diffusion were 0.40, and for tax principles it was


Figure 4 The structural model of the study with standard estimation coefficients.

0.48. This indicates that 40% of the E-commerce diffusion was representedby the ICT development index (IDI) of 40% and 48% of the E-Commercetaxation principles represented with the E-commerce diffusion and the ICTdevelopment index (IDI) in the model. The β-value of 0.64 indicates thatthe relationship is strong. This means that ICT development index (IDI) isimportant in determining the E-Commerce diffusion.

4.6 Circular Model for E-Commerce Sustainability (CMES)

In this part, the total factors are combined into the circular model forE-Commerce sustainability (CMES). As shown in Figure 5, the proposedmodel consists of three categories as detailed hereunder.


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Figure 5 Circular model for E-Commerce sustainability (CMES).

4.6.1 E-commerce taxation principlesThe E-Commerce taxation principles consist of five topics. Taxation shouldseek to be neutral and equitable between forms of online commerce andbetween conventional businesses. The costs for taxpayers and administrativeexpenses for the tax authorities should be minimized based on the efficiencyprinciple. Certainty and simplicity in the tax regulations should be clear andfrank to savvy so that taxpayers can plan the tax consequences in advance inthe transaction and how the tax is to be accounted for. The policy for taxationshould the right amount of tax and at the right time. The hidden factors for taxevasion and avoidance must be minimized by the principles of effectivenessand fairness.

The flexibility in the systems for taxation should be dextrous and dynamicto ensure that the online businesses keep pace with new technologies andmodern commercial developments. These principles should be based oninternational policy standard. The policies and regulations of E-commerceshould remain consistent with this approach.

4.6.2 Information and communication technology developmentInformation and communication technology are essential as they also facil-itate E-Commerce growth. Many countries that have an investment in highICTs will benefit from increased productivity effected by E-Commerce.


Therefore, the ICT development index (IDI) is designed to be global andreflect changes taking place in countries at different levels of ICT develop-ment. It is comprised of 3 subindices and 11 indicators. ICT access providesan indication of the available information and communication technologyinfrastructure and individuals’ access to primary ICT. The number of fixedtelephone, mobile-cellular telephone and percentage of people who have acomputer and access to the internet are monitored in this sector. The infor-mation and communication technology intensity and usage are measured inICT use. The number of subscriptions in fixed broadband, mobile broadbandand proportion of individuals using the internet are evaluated in this part. Theeducation ratios of the population and skill for ICT are important for learningand using E-Commerce within ICT skill.

4.6.3 E-Commerce diffusionThe conditions and policy which are involved in developing digital resourcesare remarkable in the E-Commerce system development. The global envi-ronment, national environment and national policy are three main factorsinvolved in broadening E-Commerce. The global environment, such as theproduction networks, rely heavily on ICT and E-Commerce to link supplychains in online businesses. Besides, the investment of international firmsand global market competition are a drive to trade liberalization. In thenational environment, the country demographics probably act as enablers forE-commerce growth. Also, the economic and financial resources includingconsumer preferences are first essential for motivating people to onlinebusiness market in many countries. Important to the national policy arethe liberalization of the telecommunications facilitates, ICT and internetdiffusion. The industrial promotion in various forms such as the promotion ofICT and E-Commerce in online businesses is ensured by providing technicalknowledge, training and funding for information technology literacy fromthe state. Especially, this is true with E-Commerce legislation on digitalsignatures, privacy, consumer protection, copyright and intellectual property.These factors impel the E-Commerce sustainably and efficiency.

The CMES paves the way to E-Commerce sustainability. The ICT andinfrastructure will be developed through the national indicator standardfor evaluating self-efficiency in the ICT sector. The sufficiency in digitalresources and infrastructures that are efficiency and convenience will supportthe E-Commerce business to people throughout the supply chain. The incomefrom the internal and external country online business will inevitably returnto the country via taxation. This income will be used as investment for


maintenance and development for the ICT and infrastructure in E-Commercecontinually. The principles of E-Commerce taxation are the guidelinesfor evaluating the policy and regulation of E-Commerce tax in the lightof CMES.

5 Discussion and Findings

This paper has various contributions regarding the relation of E-commercetaxation principles (ETP) on ICT development index (IDI) and E-Commercediffusion (ED). Our results show the following contributions. Firstly, thefindings of the study explain that the relationship between IDI and ED is bothpositive and significant. Secondly, the study illustrates that ED is positivelyrelated to ETP. Thirdly, the results of this study indicate that IDI has a directimpact on ETP. According to the study, ED and IDI have a direct effect onE-commerce taxation principle. Otherwise, it can be claimed that the effectof IDI on ETP is mediated through ED.

The IDI directly affected ED. The main factor in ICT access and ICTuse is more important to promote E-Commerce growth via a sufficient digitalresource [31, 32, 33, 34].

The high potential information and communication technology will bestimulating the national population to have the capability to access domestichigh-speed internet network efficiently and conveniently. The developing dig-ital resources which are necessary for the E-commerce system, for example,mobile devices, smartphone and communication public utility in high-speedinternet network and public Wi-Fi broadband must improve continuously.Due to the necessity of digital resources, information technology, and com-munication system for E-commerce in the countries that have potential willhave a competitive market advantage as well as framing trustworthy for thedomestic and global entrepreneurs [15, 16, 17]. However, the result in ICTskill was a distinct finding. They thought that education was not importantfor the online business than their experiences.

Effectiveness and fairness (EF) and flexibility (FT) are more significantfactors of E-commerce taxation principles (ETP). The factors of tax evasion,tax payable at the right time, including flexiblity in regulations and policy intax E-Commerce must be considered in the online business continually [18,19, 20, 21]. While efficiency (EC) was not an influential factor in ETP, due tothe cost in tax administration service it is not high in the current study.

The variables in Global Environment (GE), National Environment (NE)and National Policy (NP) were suitably significant and are related to


E-Commerce Diffusion (ED) [14]. E-Commerce was affected by the globalenvironment (GE) factor such as the global production network to supplythe products cross over the country and trade liberalization for competitionin the online market. In terms of National Environment (NE), the financialresources and demographics such as cultures and firm size are imperative forstimulating people to online business.

The findings showed results in the relationship between information andcommunication technology development and E-Commerce diffusion throughE-Commerce taxation principles. Therefore, it should have a special typeof tax for both domestic and international online trading entrepreneurs orE-Commerce entrepreneurs that bring in national income by using digitalresources and information technology and every communication connectiondirectly and indirectly. Therefore, particularly the tax should be paid fordeveloping and maintaining digital resources and information technologyinfrastructure. The policies such as tax intensives or tax for investment shouldbe promoted following this conceptual because it facilitates the developmentof technologies and knowledge from global investors to local businesses.The special tax will stimulate domestic and international entrepreneurs tohave the capability to use information technology and communication systemefficiently. Because, once the E-Commerce entrepreneurs and people becomecapable of accessing the efficient service rapidly, it will benefit E-Commerceoperation precisely. Whether or not the information technology and com-munication system will be developing continuously and adequately, it willcertainly lead to the profitable E-Commerce business and online trading cor-respondingly. On the other hand, online trading and E-Commerce growth willsupport the information technology and communication systems to expand.However, developing and promoting E-Commerce diffusion to grow needsaccommodated regulation and a model with domestic and global conditions.

However, there were some limitations to this study. The useable question-naires were sufficient merely to test the model but not sufficient to validatethe model. Some items may be the bias from the experts in the process ofIOC for validating the questionnaires. Furthermore, most of the respondentswere from the online businesses in Thailand, therefore, the result may not bepostulated to international online business. The community online commercein Thailand may have some different regulation and demographics whencompared with other developed countries such as the United States, Chinaand the United Kingdom. Thus the results may not be generalized to somecountries that would have more complex and different regulations and policyof E-Commerce taxation. In addition, there are still limitations with respect to


other factors and data collection. The necessary elements should be includedin the model for further studies such as the Information Systems SuccessModel in terms of the features of information quality, service quality, systemquality, user satisfaction and intention to use [48].

6 Conclusions

The proposed framework from this study gives the perspective for guiding thepolicy for E-Commerce taxation through the concept of the CMES. Accord-ing to the idea of the CMES, the concept is promoted and developed in theE-Commerce system growth. E-Commerce flow focuses on accessible andusing information technology and communication systems of domestic andinternational businesses rapidly and conveniently. Because of the efficiency,E-Commerce accessibility will support E-Commerce advancement. Further-more, CMES also evokes the factors which relate to the domestic and globalconditions to be essential in E-Commerce development and hence collaborateto taxation appropriately. Consequently, E-Commerce enlargement will ledto the principal in the national economic system, whereas the governmentwill gain income and thus the national budget for E-Commerce taxation todevelop digital resources and information technology structure for efficientand sustainable E-Commerce business can be prepared and submitted.

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Biographies

Somkeit Noamna received his B.Sc. degree in computer science from thePayap University, Thailand in 2003. He also received the M.Eng. degree inindustrial engineering from the Chiang Mai University in 2013. He is cur-rently the Lecturer of Modern Management Information Technology, Collegeof Arts, Media and Technology, Chiang Mai University, Thailand. He iscurrently a Ph.D. student in Technology of Information System Management.His areas of research interests include information technology management,production management and computer for production management.


Supaporn Kiattisin received her B.Eng. degree in applied computer engi-neering from the Chiang Mai University, Chiang Mai, Thailand, in 1995, theM.Eng. degree in electrical engineering and the Ph.D. degree in electricaland computer engineering from the King Mongkut’s University of Tech-nology Thonburi, Bangkok, Thailand, in 1998, and 2006, respectively. Sheis currently the programme director of Technology of Information SystemManagement Division, Faculty of Engineering, Mahidol University, Thai-land. Her research interests include computer vision, image processing, robotvision, signal processing, pattern recognition, artificial intelligence, IoT, ITmanagement, digital technologies, big data and enterprise architecture withTOGAF 9 certification. She is a member of the IEICE and TESA. Sheserved as a Head of the IEEE Thailand Chapter in Biomedical Engineering.She also served as the Chairman of the TimesSOC Transaction Thailand.She has expertise in enterprise architecture (EA), data sciences, informationtechnology in E-government and digital economy (DE).

a conceptual model of e-commerce taxation using a circular

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